Tuesday, December 15, 2015
U.S. High Court Upholds Class Arbitration Ban in DirectTV’s California Customer Contracts
From Staff and Wire Service Reports
The U.S. Supreme Court ruled yesterday that California customers of DirecTV cannot sue the satellite provider or bring class-wide claims in arbitration.
In a 6-3 decision, the justices said that DirecTV’s contracts can specifically prohibit customers from banding together to sue the company, even if California law in effect when the contract was signed provided otherwise.
It’s the latest in a series of high court rulings that favor the ability of businesses to limit their litigation costs by including mandatory arbitration in standard customer contracts. Consumer advocates say such agreements rob customers of any meaningful power to challenge corporate misconduct.
Writing for the court, Justice Stephen Breyer said California law, as interpreted by the Court of Appeal in the case before the high court, is preempted by the Federal Arbitration Act, which lets companies require customer disputes to be settled one by one in arbitration.
The case began in 2008 when Amy Imburgia and Kathy Greiner filed class action lawsuits claiming that DirecTV wrongly charged them cancellation fees. At issue was language in the customer agreement that said contract disputes would be settled through arbitration unless “the law of your state” prevents it.
In this case, the Court of Appeal ruled, “the law of” California was that set forth in Discover Bank v. Superior Court (2005) 36 Cal.4th 148, which held that waivers of the right to class-wide arbitration violate the state’s public policy. Although the holding was overruled after Imburgia and Greiner signed their DirecTV contracts—in AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. 333—it was part of the law by which Imburgia, Greiner, and DirecTV agreed to arbitrate, the Court of Appeal reasoned.
Breyer, however, saw it differently. He said language in the contract referring to state law means “valid state law.”
Just because the state law was valid at the time the contract was made did not matter if it became invalid later, he said.
Justice Clarence Thomas dissented, saying he does not believe federal arbitration law applies to proceedings in state courts.
Justice Ruth Bader Ginsburg issued a separate dissent, joined by Justice Sonia Sotomayor, saying that parties to a contract can choose to be bound by a particular state law, even if it is superseded by federal law.
Ginsburg said the majority opinion and previous ruling in favor of arbitration clauses “have predictably resulted in the deprivation of consumers’ rights to seek redress for losses.” As a result, she said powerful companies can impose contracts banning class action lawsuits “on people with little or no bargaining position.”
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